National Legislative & Policy Update Florida ALHFA Annual Education Conference July 7, 2016

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1 National Legislative & Policy Update 2016 Florida ALHFA Annual Education Conference July 7, 2016

2 Presentation Overview A. Political and Election Update B. Legislative and Policy Outlook for 2016 C. HUD OIG Audit 2

3 2016 Political Update 3

4 Presidential Recent national polls have Clinton at +4 to +10 vs. Trump Outcome has strong implications for Senate elections Clinton roughly +4 in Florida U.S. Senate: Current Makeup: 44 Ds 54 GOPs 2 Independents (that caucus with Ds) One third of the Senate up for election: 7 states that are toss ups or potential Dem. pickups U.S. House Current Makeup: 188 Dem 247 GOP (218 need for a majority) Recent analysis indicate a Dem pickup of +7 seats Implications Outcome of election will likely determine agenda for Lame Duck Congress A good night for Trump likely means Senate stays in GOP hands A Clinton landslide victory likely means a Democratic controlled Senate in

5 2016 Elections: Electoral Map NALHFA Policy Review and Outlook 5

6 2016 Elections: U.S. Senate Map NALHFA Policy Review and Outlook 6

7 Legislative and Policy Outlook for

8 2016 Budget and Appropriations Political and Policy Challenges Calendar: Roughly 110 Congressional work days in 2016 Congress to recess for 7 weeks on July 15 (won t return until September) A lame duck Congress will finish appropriations after elections Tough work of budget resolution essentially completed in 2015 Only $1 billion increase in non defense discretionary spending means status quo On going Congressional battles: Supreme Court Nomination (initial battle tamped down; will reemerge after November elections) Zika funding LBGT protections Gun control in wake of Orlando shooting Impact of Presidential election on down ballot races/senate in play and House likely to remain GOP Florida Senate race changes with Rubio back in as candidate (Rubio Murphy dead heat) NALHFA Policy Review and Outlook 8

9 NALHFA Policy Review 9

10 U.S. Department of Housing and Urban Development (HUD) Community Planning and Development (CPD) programs Community Development Block Grant (CDBG) Program: $2.8 billion, a reduction of $200 million, with legislative revisions to program. Administration again requesting to include CDBG in the Upward Mobility Project, which is a new initiative that blends funding across four different block grant programs Social Services Block Grant, Community Services Block Grant, CDBG and HOME. Senate Appropriations Committee bill approved 5/19 provides $3 billion and rejects Administration proposed revisions House Appropriations Committee measure approved 5/24 provides $3 billion HOME Investment Partnership Program: $950 million, level funding. Budget seeks to: eliminate the 24 month commitment requirement; eliminate the 15 percent Community Housing and Development Organizations (CHDO) set aside; establish a single qualification threshold of $500,000; and eliminate existing grandfathering provisions to allow the termination of participating jurisdictions with funding that falls below the threshold three out of five years. Senate bill provides $950 million, rejects Administration s proposed changes, but approved amendment eliminating HOME commitment deadline House provides $950 million and no administrative and programmatic changes Rental Assistance Demonstration (RAD) Program: House and Senate do not support Administration request to eliminate 185,000 unit cap NALHFA Policy Review and Outlook 10

11 U.S. Department of Housing and Urban Development (HUD) Housing Trust Fund (HTF): GSEs deposit 4.2 bps of $1 of UPB of total new business purchases into HTF 65% to HTF 35% to Capital Magnet Fund (for CDFIs) For 2016 HUD has indicated $174 million will be distributed to states Funds will be sufficient to provide minimum statutory allocation of $3 million to each state Roughly $4.6 million to Florida funds distributed to states in summer In Florida, funds will be allocated to Florida Housing Finance Corporation for subgrant and/or distribution Public hearing on July 28 to review draft allocation plan/draft plan available on FHFC website NALHFA Policy Review and Outlook 11

12 Tax Reform At end of 2015 Congress PATH Act extends or makes permanent a number of tax incentives that expired at the end of In total, the measure extends provisions at a cost of $622 billion over 10 years, including: Low Income Housing Tax Credit (LIHTC): permanently extends the minimum 9% housing credit and exclusion of military housing allowances for determining income for purposes of low income tax credit buildings/bill does not include provision establishing minimum 4% credit as outlined in Senate Finance Committee approved legislation New Markets Tax Credit (NMTC): 5 year extension ( ) at current authorization level of $3.5 billion annually Tax reform off the table until 2017, at the earliest. However, markers already being set down for tax reform going forward: Sens. Maria Cantwell (D WA) and Orrin Hatch (R UT) unveiled bipartisan proposal to increase Housing Credit by 50 percent over next 10 years; establish minimum 4 percent Housing Credit, and allow for income averaging House GOP tax blueprint A Better Way for Tax Reform unveiled by Speaker Paul Ryan (R WI) and Ways & Means Committee Chairman Kevin Brady (R TX) makes no mention municipal bonds or current tax exemption, or Housing Credits NALHFA Policy Review and Outlook 12

13 Clinton Housing Agenda Unveiled $25 billion housing investment plan in February that includes: Expansion and permanent extension of the New Markets Tax Credit (NMTC) and double funding for the Community Development Financial Institutions (CDFI) Fund Provide funding to address both commercial and residential blight Increase the supply of affordable rental homes by expanding annual allocations of Low Income Housing Tax Credits Reform the Section 8 program to help recipients of rental assistance vouchers access neighborhoods with good schools, jobs, public transit and other resources Create incentives for state and local policymakers to enact effective land use rules and other regulations that promote the development of new rental housing Make comprehensive investments in high poverty neighborhoods, including resources to clear blight and preserve the supply of affordable homes. Promote sustainable homeownership by helping families save for a down payment, supporting housing counseling and updating federal underwriting tools and other factors that can restrict access to credit. NALHFA Policy Review and Outlook 13

14 Review of HUD OIG Audit of DPA Programs NALHFA Policy Review 14

15 Overview Timeline July 9, 2015: OIG releases audit of NOVA Financial participation in HFA DPA programs July 20, 2015: FHA Head Ed Golding clarifies FHA support of state and local DPA programs August 11, 2015: HUD General Counsel issues internal interpretation of NOVA DPA programs September 30, 2015: OIG releases audit of loandepot participation in HFA DPA programs April 1, 2016: OIG issues subpeonas to ehousingplus and U.S. Bank seeking any info related to HFA DPA grants/secondary loan programs from Jan. 1, 2012 Sep. 30, 2015 May 25, 2016: HUD Dep. Sec. issues decision memo rejecting NOVA audit findings 15

16 Overview OIG Audit NOVA Financial participation in several state and local HFA programs examined in audit Phoenix and Maricopa County (AZ) IDAs Tucson and Pima County (AZ) IDAs Other state and local HFAs in Arizona, Colorado and Nevada OIG audit indicates two major areas of NOVA Financial noncompliance with FHA rules and regulations with respect to participating in an HFA DPA program 1. DPA derived from a premium priced mortgage 2. Borrowers making a repayment of the DPA gift/grant through an above market rate mortgage loan NALHFA Policy Review and Outlook 16

17 Overview HUD Decision Prohibited Sources Provisions and Treatment of Governmental Entities: references a 2012 interpretive rule that places no restriction on how governmental entities (including local HFAs) raise funds for DPA Programs Gift Funds: with respect to the NOVA audit, funds used for DPA consistent with FHA rules governing gift funds. No expectation of repayment of the DPA, HUD concludes that the DPA at issue in OIG s audit is permitted under current FHA rules. NALHFA Policy Review and Outlook 17

18 Overview HUD Decision Premium Pricing: FHA s policies regarding premium pricing were not applicable in the circumstances as alleged by OIG, and is only applicable where the interest rate negotiated between the borrower and lender results in a credit from the lender (at closing) Prospective Guidance/Recommendations: 90 days for FHA to provide any policy recommendation relating to, (1) the role of secondary mortgage market participants in providing financial assistance to governmental entities that in turn use those funds, including funds generated through prior mortgage transactions, to support down payment assistance programs; and (2) any advisable parameters governing such arrangements 18

19 Overview Further Considerations loandepot Audit still pending HUD OIG still has authority to continue investigating HFA DPA programs assumption outcome is the same Potential for FHA guidance exists: HUD Dep Sec agrees with OIG recommendation regarding an update of FHA rules and regs governing DPA and premium pricing HUD has marked out position on this issue NALHFA Policy Review and Outlook 19

20 QUESTIONS? NALHFA Policy Review and Outlook 20